Moving from the New Zealand Securities Commission to the FSA almost 10 years ago was an eye-opener for Pinsent Masons partner Tim Dolan. Overnight, he had exchanged working for a regulator with 20 staff to one with 3,000.
“I remember the first day at the FSA being amazed by just how many groups of people were dealing with things that we may have had just one person spending half their time on in New Zealand,” he says. “The FSA was doing much more detailed work but still I was flabbergasted by the size and scale of the place.”
Dolan joined the New Zealand Securities Commission in 1999 after studying law and classics and history at the University of Canterbury. He was prompted into financial services regulation by a passionate lecturer on US securities law and an appetite for puzzle solving.
“The New Zealand regime at that time put the onus on banks, stockbrokers and financial advisers to comply with laws without a lot of regulatory involvement. Financial advisers were not regulated but had to disclose to the customer what their qualifications were and whether they had any convictions. It was up to the customer to decide whether or not the advice was appropriate. It was quite a right-wing style of regulation and quite different to what we have in the UK and indeed in New Zealand now.”
Looking for a bigger market to get his teeth into, Dolan moved to the UK with his wife and joined the FSA in 2003.
He accepts “fundamental things were missed and forgotten” in the run-up to the financial crisis but says FSA staff genuinely believed they were doing the best job possible while trying to strike a balance between protecting consumers and allowing markets to function.
“It would have been inconceivable in 2006 and 2007 for banking supervisors at the FSA to say a much tougher regulatory regime was needed when at the same time the City and the Government were doing everything possible to continue the boom culture. It would have taken a very brave person to put that forward and succeed.”
Dolan says he learnt a lot during his time at the FSA. He worked on retail financial services enforcement cases, insider dealing cases, and legal issues such as defining collective investment schemes.
“For a lot of people that is incredibly dry and dull. But for my clients now it is absolutely fundamental when structuring schemes. Given the FSA’s response to unregulated collective investment schemes it is vital right now to have a clear understanding of what is and what is not a CIS.”
After two years at the FSA, a friend suggested it would be good for Dolan to experience regulation from the other side of the fence in private practice. Dolan took her advice and joined SJ Berwin, before being offered a partner role at law firm Pinsent Masons, which he saw as an opportunity to make his own mark.
Dolan heads up Pinsent Mason’s financial services regulatory team. His role includes advising clients on their regulatory permissions and assisting with their terms and conditions and compliance manuals. He can also help firms with regulatory problems such as FSA investigations.
Dolan opposes the break-up of the FSA, saying the decision was purely political and that the regulatory focus could have been changed without the creation of the Prudential Regulation Authority and the Financial Conduct Authority.
He is worried about the FCA’s new product intervention powers to temporarily ban risky products or product features.
“We all know if the regulator pursues matters using its normal channels it can take many months if not years to take effect. But I am concerned the regulator will take action unfairly or mistakenly against firms in a knee-jerk manner. I think the FSA accepts there will be occasions in the future where it will unfairly prejudice against firms or potential products because it does not understand the risks.”
Dolan says in recent years the FSA’s use of skilled persons reports, where a third party checks for weaknesses or failings in a firm, got “completely out of hand”.
He says firms often agree to a skilled persons report without realising no stone of their business will left be unturned, and that the cost will be significant.
“Firms also fail to appreciate the skilled person will often have bilateral meetings with FSA about the firm without the firm being there. If we want transparent and open regulation, then why is the firm not being invited to those meetings?”
But Dolan says recently the FSA has shown a greater willingness to engage with firms. He believes there is more the regulator could do to help firms comply with the rules.
“I would personally like to see the FSA doing much more to engage with firms, who pay a lot by way of levy. It would be good to see the FSA engaging with different sectors such as IFAs, particularly smaller firms, and not just saying you need to have good systems and controls but producing a template document which ensures staff clearly understand the regulatory framework and what their obligations are.”
Dolan predicts the FSA will step up its efforts to bring cases against individuals in senior management.
“Most recent action against senior management has been against small firms, partly because they did not fight it hard enough or did not have the resources to fight. Individuals at bigger firms have been able to point their finger at someone else or explain their role in such a way so they are not held personally responsible. We will see more instances of the FSA trying to take action against individuals.”
He says it will also become harder for individuals to challenge cases due to the FCA’s early warning notice powers under which the regulator can publish when individuals or firms are subject to ongoing investigations. It emerged last week the FSA is also pushing for the FCA to be able to suspend approved persons under investigation.
It has also not yet been decided whether the Regulatory Decisions Committee, the first stage of the FSA’s independent appeals process, will be maintained under the new regulatory structure.
Dolan says the FSA’s thinking behind not keeping the RDC is it often hears the same arguments at the RDC stage and later at the Upper Tribunal stage.
He says if enforcement cases are not subject to rigorous challenge then future regulatory staff may not fully appreciate the standard to which they have to evidence their case.
“It is expensive going to the RDC, and the advantage of not having it may be a quicker and cheaper process. But it may be that the regulator gets quicker to a wrong decision.”
Born: Wellington, New Zealand
Lives: Chislehurst, Kent
Education: B.A. Classics/History and Bachelor of Laws, University of Canterbury, New Zealand
Career: 2007-present: partner leading the financial services regulatory team, Pinsent Masons LLP; 2005-2007: associate, SJ Berwin LLP; 2003-2005: advanced associate, FSA; 1999-2003: solicitor, New Zealand Securities Commission, including 2001-2003: solicitor and secretary, secondment to New Zealand Takeovers Panel
Likes: Having lunch with my family and friends at the weekend, the All Blacks, running, skiing, walking, Canterbury Crusaders, New Zealand rowing squad
Dislikes: Unnecessary financial services jargon, time wasting, inconsistent and inappropriate financial services laws
Drives: Lexus RX350
Book: Open: An Autobiography by Andre Agassi
Film: Pulp Fiction
Album: The Joshua Tree – U2
Career ambition: To always be challenged, to always support my staff and my clients, to try to improve financial services regulation
Life ambition: To do all that I can for my family and friends, to give something back to society and to have as few regrets as possible
If I wasn’t doing this I would be….hoping to work for BBC News